OPEC+ nations agree to cut oil production to boost sliding prices

OPEC+ agreed to cut its collective output limit by 2 million barrels per day, delegates said, as the group seeks to halt a slide in oil prices caused by the weakening global economy.

It’s the biggest reduction by the Organization of Petroleum Exporting Countries and its allies since 2020, but will have a smaller impact on global supply than the headline number suggests. Several member countries are already pumping well below their quotas, meaning that they would already be in compliance with their new output limits without having to reduce production.

A cut of 2 million barrels a day in the group’s output target, shared pro rata, would require just eight countries to curb actual production and deliver a real reduction of about 880,000 barrels a day, according to Bloomberg calculations based on September output figures.

Even so, the cartel’s decision risks adding another shock to a global economy that is already battling inflation driven by high energy costs.

The move would also irk the U.S. — and potentially trigger a response from Washington. President Biden visited Saudi Arabia earlier this year in search of higher production and lower pump prices for Americans ahead of midterm elections in November.

Earlier on Wednesday, U.S. officials were making calls to counterparts in the Gulf trying to push back against the move to cut production, according to people familiar with the situation. Already, the White House had asked the U.S. Energy Department to analyze whether a ban on exports of gasoline, diesel and other refined petroleum products would lower prices, Bloomberg reported Tuesday. It’s a controversial idea but one that’s gaining traction in some corners of the Biden administration.

In Vienna, there was little sign before the OPEC+ meeting that the U.S. pressure was working. United Arab Emirates Energy Minister Suhail Al Mazrouei insisted that the decision was “technical.”

“It’s very important that it remains as a technical decision and it’s not political,” he told reporters. “That’s why it’s important to look at technical side of the equation and look at any concerns regarding the economy and the status of the economy.”